As people have become increasingly reliant on the internet for financial and social tasks, many people have acquired a lot of digital assets, like virtual currencies and social media accounts.
Unfortunately, figuring out what happens to these digital assets after death can be confusing. Ownership may not be as easy to transfer as physical assets. And those who are in charge of managing your estate may have difficulty finding and accessing your digital assets.
The good news is, the laws related to digital assets are evolving. Here's what you need to know.
What are digital assets?
Digital assets refer to any electronic records or materials you have a legal interest in. These include digital files and online accounts such as:
- Social media accounts
- Email accounts
- Virtual currencies
- Your PayPal balance
- Outstanding credit card points or miles
- Online seller accounts (such as your eBay, Etsy, or Amazon seller account)
- Digital files such as documents and photographs
- Your digital music library
- Your cloud account
Sometimes, these assets have substantial monetary value. For example, you might have an account with tens of thousands of dollars of Bitcoin or a thriving Amazon store that nets you six figures a month. Or you could have a vast library of music you paid to download.
In other cases, the accounts may have sentimental value, such as a social media account with lots of pictures or an email account with a record of your correspondence for the last several decades.
What all these digital assets have in common is that transferring ownership of these assets isn't as easy as naming a beneficiary for a home or bank account.
Do digital assets pass through your will?
A will is the most basic estate planning document, and many people have one. As a result, you may be interested in transferring ownership of digital assets through your will. For instance, you might want to transfer your cryptocurrency balance or your credit card rewards. But this isn't always going to work for a couple of reasons.
First, while you may want to specify that an heir will inherit your accounts, sometimes companies will have terms of service that prevent the transfer of access rights. For example, digital music and books are often non-transferable. While you may "own" the books or music you've paid for, you do so subject to the licensing restrictions the seller put in place.
If you grant someone access to your digital music library or your seller account, but the website that you used says that a transfer of ownership isn't allowed, the web company's terms could override your wishes.
Second, leaving passwords or user names in a will typically isn't the best idea. Wills become public record when they go through probate after a person’s death. So it’s possible anyone could find your account information, which would compromise account security. Even if you give this information to heirs in a more private way, such as by including them in a binder you prepare in case of death, terms of service or privacy laws may require your executor or heirs to prove a legal right to access your accounts.
Some states do have laws that aim to protect assets to digital accounts. For example, executors of an estate are allowed to access email accounts in Connecticut and Rhode Island. While Idaho, Indiana, and Oklahoma have broader laws in place that allow executor access to blog accounts and social media as well as email. But not every state has made similar provisions.
Guidelines and policies around digital assets
Although the law has been slow to evolve to address digital assets after death, efforts are being made to change that. For example, a growing number of states have adopted either the Uniform Fiduciary Access to Digital Assets Act or the Revised Uniform Fiduciary Access to Digital Assets Act.
The Uniform Fiduciary Access to Digital Assets Act was first created in 2014. It aimed to provide executors the same right to digital accounts as the original owner had during their lifetime. Executors had the right to obtain passwords from online companies in order to do that.
There were serious concerns about privacy for the deceased under the original UFADAA, so the revised version aims to balance the rights of the deceased to keep information confidential with the access executors need.
Specifically, the RUFADAA:
- Allows executors access to electronic communications — such as emails, chats, or tweets — only in cases where the deceased person expressly consented to share this information. The company's terms of service can also control the executor's ability to access accounts in circumstances where the deceased didn't expressly provide permission for access.
- Allows executors access to other digital accounts after the executor petitions the court to show why access is necessary. This helps to ensure the executor has access to things like a Paypal account balance.
You can check the National Conference of State Legislatures to see whether your state has adopted the UFADAA or the RUFADAA, or neither.
Specific company guidelines
Some companies have also provided their own procedures for gaining access to a deceased person's account.
For example, Google allows users to set up an Inactive Account Manager to instruct the company about who should access their information.
Google also provides the option to submit a request to access a deceased person's account. However, while the company will sometimes provide content from the account, they do not give passwords or login details without the permission of the deceased. Their focus is on protecting the account holder's privacy.
Facebook also offers the chance to appoint a legacy contact to manage an account after death or provides an option for the account to become permanently deleted. If no one is given the authority to manage the account and Facebook becomes aware of your passing, they will turn it into a memorialized account. No one will be allowed to log in or make changes unless you've designated a legacy contact, but friends would be able to share memories on your page if your privacy settings allowed it.
Best practices for passing along your digital assets
To put your plan in place:
- Research the terms of service for websites you use to understand what right you have to transfer your account after your death.
- Review your state laws to understand the default rules for your digital accounts when you pass away.
- When possible, complete the appropriate process with the companies that hold your digital assets to specify who should be allowed access after your death, if anyone.
- Make a full list of your digital assets and decide what you want to happen to each account and who should be provided with access.
- Work with an estate planning attorney to develop the right documents, such as an advanced directive, health care proxy, power of attorney, or will to specify who has the right to your digital accounts.
- Make a list of digital assets as well as usernames and passwords to access them, and keep it in a secure place where your family members can find it.
What's considered a digital asset?
Digital assets are intangible assets that you have a legal interest in due to an electronic record only. Examples include:
- Email and social media accounts
- Online subscription services
- Paypal accounts
- Online storefronts such as an Amazon or Etsy account
- iCloud storage
- Digital books, pictures, or other media
- Digital gaming assets
Sometimes digital assets have monetary value, such as cryptocurrencies or a Paypal account balance. Other times, they have only emotional or sentimental value.
Is an online bank account a digital asset?
An online savings account or checking account is a digital asset. But you have a full ownership right to the money in the bank and can pass it on to your heirs. This separates it from some other types of digital assets, which may have terms and conditions preventing you from transferring ownership.
Is Bitcoin a digital asset?
Bitcoin is a digital asset. But, like with an online bank account, you own your Bitcoin outright and can pass it onto heirs.
The terms and conditions of the digital wallet where you hold your Bitcoin can't prevent you from transferring ownership upon death. However, depending on the company's terms and conditions, they may not have to provide heirs access to your account if you don't provide login details.
Are credit card rewards a digital asset?
Credit card rewards are considered a digital asset. But many credit card issuers state in their terms of service that cardmembers don’t own their rewards. Given this, it’s generally not possible to pass these rewards along to your heirs through a will.
Instead, you might consider adding your loyalty program account information to a document that you keep in a secure place. That way, your loved ones could access your account and potentially transfer the rewards to their own account. That said, that the rules are different for different programs, so it’s best to do your due diligence to determine if and how you can pass along your credit card rewards.
Estate planning is a lot more complicated now that so many assets exist only in the digital realm. But by knowing the laws and terms and conditions applicable to your digital assets and making a plan in advance, you can ensure that your loved ones have access to the accounts that you want them to after you pass on.